TaxTMI 
TaxTMI 
1993 (12) TMI 46
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....additions to the tune of Rs. 12,70,683 as deduction of the aforesaid amount was not allowed under section 40A of the Act. As such payments were made in cash and not by cheques or drafts, the aforesaid amount was not to be treated as expenditure. The appeal filed by the assessee against the aforesaid order in this respect was dismissed on March 18, 1988 (annexure P-4). The matter was taken before the Tribunal. Vide order dated October 25, 1991 (annexure P-5), the Tribunal allowed the deduction of the aforesaid amount as expenditure. Shri R. P. Sawhney, the advocate for the Revenue, while referring to the decision of this court in CIT v. Surinder Sugar Store [1989] 177 ITR 511 (P & H), has argued that the aforesaid question of law should be ordered to be referred to this court. In that case, the judges were satisfied that the question of law arose out of the order of the Tribunal, to refer such a question. No doubt, the question in that case is similar to the one referred to above, Such a decision could hardly be taken as a precedent, laying down any proposition of law. The contention that in all cases where similar questions are sought to be referred, this court should exercise j....
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....he assessee in his trading activities. Section 40A(3) only empowers the Assessing Officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The payment by crossed cheque or crossed bank draft is insisted on to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of income from undisclosed sources, The terms of section 40A(3) are not absolute. Considerations of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment, Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of section 40A(3) and rule 6....
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....to and relied upon by the Gujarat High Court in Nathalal Jethalal v. CIT [1993] 199 ITR 757, though the earlier view of the Gujarat High Court was contrary as mentioned in the judgment of Attar Singh's case [1991] 191 ITR 667 (SC). Thus, payments made in cash or for acquiring stock-in-trade or other materials could be exempted from the purview of section 40A of the Act. In another case, similar questions were considered by this court in CIT v. Sawaran Singh Balbir Singh [1982] 136 ITR 595. While noticing the facts, it was held that nothing could be pointed out to show that the Tribunal did not take into consideration the relevant evidence or relied upon irrelevant evidence while arriving at the finding. The facts noticed were as under : "During the course of the assessment proceedings for the assessment year 1972-73, the Income-tax Officer found that the assessee, who was engaged in husking of paddy, had made purchases of bardana and gunny bags from a firm with which the assessee had a running account and the dealings were in cash as well as by cheques. The agreement between the assessee and the proprietor of the firm to pay by cash was an oral one. The Income-tax Officer dis....
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....e by way of cash." In para 6, it was further observed that the above circumstances were not exhaustive but were illustrative and there could be cases other than those falling within the above categories, which would also meet the requirements of rule 6DD(j). Reverting to the case in hand, reference to the order of the Tribunal dated October 25, 1991 (annexure P-5), be made and the only conclusion on perusal therefrom would be that it is only a question of fact and no question of law arises. In para 10 of the order, it was observed by the Tribunal : "We have closely considered the facts prevailing in the year and the relevant provisions. The assessee's assertion that it had no bank account at Hamira has not been even stated to be wrong and, therefore, it is accepted as a fact. The other averment that even Jagatjit Industries Ltd., also had no bank account at Hamira did not come for any adverse comments from the Revenue authorities. Such being the case, the second exception spelt out by Circular No. 220 dated May 31, 1977, clearly came to the assessee's rescue because the transactions were made at a place where the assessee and the seller both did not have a bank account. Th....